Devaluation and The Balance of Trade: A Synthesis of Monetary and Elasticity Approaches

The elasticities and monetary approaches to balance of trade and balance of payments give different predictions about the effects of changes in exchange rates on the trade balance and balance of payments. This paper, using a theoretical model, supports the arguments that elasticities and monetary approaches to balance of payments are complementary theories since each is merely a fragment of a larger system. It was shown that the short run effects of devaluation are those produced by the elasticities approach and the long run effects are those implies by the monetary approach. [431]     

Interest Rate Flexibility and the Open Economy*

The objective of the paper is to analyze the importance of institutional changes in the financial system for the efficacy of monetary policy and in particular for the connection between the balance of payments (capital account) and monetary policy. Particular institutional developments studied include the emergence of certificates of deposit and the removal of interest rate ceilings in 1973. The result established, using a general equilibrium model, is that the degree to which transactions in the capital account of the balance of payments offset a domestic monetary expansion is greater in a regime of market-determined interest rates than in a regime of administered rates.     

MULTIVARIATE COINTEGRATION APPROACH TO THE DETERMINATION OF RESERVES AND BANK CREDIT: A CASE STUDY OF TURKEY*

The paper estimates both long-run reserves and long-run money demand equations using the multivariate cointegration approach. An economic model is constructed, based on the monetary approach to balance of payments in which the monetary authorities can control money supply through changes in bank credit. The vector auto-regressive methodology is used to derive latent equilibrium relationships, and the short-run error correction equations are estimated for both nominal money stock and reserves. A response function for the short-run changes in bank credit is developed. Given the institutional system and slow adjustments, a response function of changes in bank credit to lagged changes in reserves performs well for the period 1960–88.     

Structural Balance of Trade Deficits in a Small Open Economy with Exogenous Capital Flows: A Monetary Approach*

This paper presents a ‘structural’ balance of trade model which can be interpreted as combining two major building blocks. The first one is identical to the monetary approach to the balance of payments. The second, which explains the price level, consists of the orthodox Scandinavian model of price and wage determination. It is shown that under these assumptions the balance of trade deficit can be broken down into a structural, an imported, and a ‘home-made’ component. A n empirical illustration of the structural balance of trade model is given for the New Zealand economy.     

货币均衡对产业结构及国际收支平衡的影响

货币政策对经济发展起着重要影响,特别是完全脱离金本位的纸币体制下,货币不仅影响到通货膨胀,还会影响到汇率进而影响国际贸易。从货币均衡角度,分析经济危机发生后,利用货币政策刺激经济发展,对一国产业结构和国际贸易的影响,来说明货币均衡的重要性,分析货币政策的积极作用和负面影响,为宏观经济调节提供理论依据。     

Exchange Rate Depreciation,Wage Resistance and Inflation in Argentina (1882–2009)

This paper describes some of the main alternatives to the dominant neoclassical theories of inflation, according to which inflation is always a monetary phenomenon. The model develops a cost‐push approach, in which rising costs are mainly related to external constraints. Not only is inflation seen as resulting from balance of payments crises, but fiscal crises also are the result of the initial balance of payments crises within this framework. Fiscal deficits, and all other excess demand pressures, are absent, so that high levels of inflation are compatible with an economy that is below full employment, and stabilization is independent of fiscal adjustments. The model is then tested using a Vector Autoregression model and finds strong evidence for alternative theories of inflation over the monetarist theory. The empirical section tests both the long period (1882–2009) and the modern period (1990–2007) analyzing the impact of wages, the nominal exchange rate, the output gap and the monetary base on inflation. The results show that the exchange rate (external constraints) has been the primary cause of inflation. Wages are a causal factor in both models, and the monetary base and output gap show low causality in the long period, and ambiguous results for the modern period.     

A rational expectations model of the U.K. under floating exchange rates

This paper constructs a model of an open economy with both trade and capital flows. Private sector wealth holders are assumed to be concerned with balance sheet ratios as in a portfolio choice theoretic model. Rational expectations in the strict Muth sense is introduced via the asset allocation decision by the private sector. International trade and capital flows are treated as in the monetary theory of the balance of payments. The model is constructed for the U.K. economy and simulation and forecasting exercises are conducted for the floating period.     

The theory of tariffs in a monetary economy

A two country two commodity model of international trade in a monetary context is utilized for the re-evaluation of the classical propositions in international trade theory which are usually derived under barter. A comparison of results under alternative exchange rate regimes is given. The effects of tariffs on the balance of payments and on domestic price levels is also studied.     

A Model of Balance‐of‐Payments Crises due to External Shocks: Monetary vs. Fiscal Approaches

This paper develops a model for balance‐of‐payments (BOP) crises triggered by an external shock. Whether an external shock induces a BOP crisis depends crucially on the sequence of policy actions taken by the government's monetary and fiscal authorities. If the fiscal authority moves first and imposes an exogenous constraint on the monetary authority, an external shock can lead to a BOP crisis. However, if the monetary authority moves first and imposes an exogenous constraint on the fiscal authority, the same shock does not cause a BOP crisis.     

A note on the international transmission of inflation: The impact of U.S. inflation on Mexico

This paper investigates the relative impact of U.S. inflation and domestic monetary factors on the joint determination of inflation and the balance of payments of Mexico between 1950 and 1979. It also tests the hypothesis that the U.S. money supply has an additional, direct impact on Mexico's balance of payments.     

The Economic Contributions of Robert A. Mundell

This is the second in a series of articles surveying the contributions of recent recipients of the Nobel Memorial Prize in Economics. The 1999 recipient of the prize, Robert A. Mundell, has made important contributions in several fields, including the theory of the monetary and fiscal policy mix, the monetary approach to the balance of payments, the theory of optimal currency areas and supply-side economics. This paper provides an overview and critical evaluation of these contributions.     

外汇资产、基础货币供应与货币内生性——基于央行资产负债表的分析

2002年以来,人民币处于升值压力中,国际收支双顺差使得我国外汇资产迅速扩大,外汇占款成为我国基础货币投放最主要的渠道。文章基于央行资产负债表,通过定量研究方法分析了汇改前后基础货币的主要来源及其与基础货币变动的动态关系,结果发现:汇改后净国外资产增量变化成为基础货币增量变化唯一格兰杰因,国内信贷和发行票据作为对冲外汇资产增加、防止基础货币过快增长的手段均已失效,基础货币供应具有内生性,央行已不能通过控制基础货币数量来调控货币供应量。     

中国财政政策的外部均衡效应:相对效力检验

中国国际收支"双顺差"的长期存在,表明中国经济存在一定程度的外部失衡.基于蒙代尔政策指派理论模型以及协整检验和误差修正模型的实证估计,可以发现中国财政政策对外部均衡的相对调控效力要优于货币政策,因此中国应运用出口退税等财政政策来促进外部均衡的实现,并考虑选择发行超长期债券方式为财政赤字融资,同时还应及时完善其他宏观经济政策,从而实现中国经济长期稳定的协调发展.     

Monetary co-operation as a source of development finance: the asean case

The role of monetary co-operation among developing countries in offsetting seasonal and cyclical fluctuations in the balance of payments is discussed. Potential benefits and drawbacks are assessed in the context of the ASEAN countries.     

From 'static' gold to the floating dollar

In this paper we discuss some features of the balance of paymentsposition of the country that issues the key currency under differentinternational monetary standards. The analysis takes a Sraffian‘standpoint’, where the monetary rate of interestof the central country is seen as an independent policy variable.The critical analysis of the theories and experiences of earlierstandards helps us to understand the current ‘floatingdollar standard’ in which the US economy becomes completelyfree of any balance of payments constraint.     

Anticipated and unanticipated money: a case study of Malaysia

The paper tests the LSW proposition that unanticipated policy changes affect real economic variables by using Malaysian data over the period 1970:1–1990:4. The empirical evidence changes in fiscal policy and balance of payments do not affect real output, thus lending support to the proposition. On the other hand, anticipated monetary policy and inflation influence output in the short-run, lending support to Mishkin's views of the economy and rejecting the LSW proposition. In addition, the long-run neutrality proposition is not supported by the data. Moreover, unanticipated changes in inflation do influence real output in the short-run lending support to the LSW proposition. However, unanticipated changes in monetary policy, balance of payments and fiscal policy do not influence real output, lending support to the classical view of the economy and rejecting the LSW proposition. Furthermore, the Monetarist's view that inflation is a monetary phenomenon is rejected. The findings also show that unanticipated movements of money supply contribute significantly to the inflation rate. The Chow test shows that the coefficients remain stable over the period of study.     

Macroeconomic consequences of increased productivity in less developed economies

This paper examines the impact of improvements in productivity on prices, output, the real wage rate and the balance of payments. Within the context of the model used in this paper, an improvement in productivity can take two alternative forms: (1) a cost saving for a given output and (2) an increase in production without a direct decrease in employment. The results presented are based on a simple model of a small open economy that includes some key features of less developed economies. It is shown that, in the presence of monetary and fiscal restraints, an improvement in productivity leads to increases in output, employment and the real wage and the effect on the balance of payments, in the short and the medium runs, is also positive. We find that whether or not improvement in productivity is import saving plays a crucial role in both comparative static and simulation exercises.     

关于“双顺差”背景下实现中国内外均衡的思考

内外均衡目标是指充分就业、物价稳定、经济增长及国际收支均衡。目前，中国正面临通货紧缩的压力和国际收支双顺差的格局，因此需通过扩张性的财政及货币政策进行协调，同时辅以汇率及利率政策。只有内外兼顾统一才能使经济实现稳定发展。     

Devaluation,Capital Mobility,and Long-Run Equilibrium*

The paper considers a small, fully employed economy with non-tradeables, securities, and money. The paper first analyzes the effects of devaluation and financial controls in the short-run equilibrium on the trade balance, the capital account, and the overall balance of payments. Disequilibria in the capital account and the overall balance of payments cause changes in the stock of securities and money, shifting the short-run equilibrium. The paper investigates the condition for the- uniqueness and stability of the long-run equilibrium under this adjustment process (‘specie flow mechanism’). Finally, the long-run equilibrium effects of devaluation and monetary policies are examined.